Cash Cow

San Diego, Hub of the U.S. Drone Industry

With the U.S. drone industry contributing billions to their city, residents of San Diego must reconcile their politics with the need to keep their economy humming.

Seemingly everybody’s talking about drones. And arguably no city is paying closer attention to the national debate over these controversial unmanned aerial vehicles (UAVs) than San Diego, the undisputed drone capital of America.

Sens. Chuck Grassley (left) and Dianne Feinstein listen as Sen. Patrick Leahy (center) speaks during a hearing of the Senate Judiciary Committee on March 20. The committee called drone industry experts to testify about the future use of drones in law enforcement. (Brendan Smialowski/AFP/Getty)

Best known for its zoo, sunshine, captive killer whales, and military bases, San Diego is also home to the world’s two leading drone makers: General Atomics Aeronautical Systems, builders of the Predator and Reaper drones that target terrorists around the world, and Northrop Grumman, makers of the Global Hawk surveillance drones.

Several smaller San Diego–area companies, too, build drones, and additional firms make component parts and engage in research and development. These companies are looking at a variety of applications for this technology, from law enforcement to mapping to power-line observation. Even underwater drones are being developed.

Erik Bruvold, the president of the National University System Institute for Policy Research, says drone-related businesses in San Diego County generate as much as $2 billion in annual revenue and have created as many as 14,000 jobs. He notes that these are “just estimates.” Exact numbers aren’t publicly known, he says, because “many of these [drone] projects are classified.”

Bruvold’s institute recently released a report on the economic impact of UAVs in San Diego. Commissioned by the San Diego North Chamber of Commerce, the report, which states that drone production now accounts for more than 12 percent of all Department of Defense contract activity in the county, concludes rather predictably that drones are very good for local business.

But the growing concerns nationwide about these aircraft have even staunch boosters of these unmanned vehicles acknowledging that the industry’s future is up in the air.

The FAA predicts that by the end of this decade as many as 30,000 drones will be flying in U.S. airspace. But more than 30 states from Virginia to California have recently introduced or already passed legislation that restricts and in some cases bans the vehicles.

On the federal level, Kentucky Sen. Rand Paul’s recent 12-hour filibuster rant, which was mostly about drones, intensified the debate. And last week lawmakers at a Senate Judiciary Committee hearing expressed deep concerns about the privacy threats posed by domestic drones—concerns that came from both sides of the aisle.

Some San Diegans worry that the current push-back against drones could lead to a slowdown in production and stunt the local economy, which is already expected to take a big hit because of sequestration.

“This could have a very negative affect on jobs and commerce here,” says Debra Rosen, the president of the North San Diego chamber. “We don’t get into the political part of it, but the UAV industry in San Diego County means jobs. Any time an industry is threatened, an entire community is potentially impacted, especially small business.”

Despite the anti-drone fervor, it appears to be business as usual in San Diego, at least for now. General Atomics would not comment for this story, but Cyndi Wegerbauer, Northrup Grumman’s director of communications, said the company is transitioning its entire drone program to the new Unmanned Systems Center of Excellence in Rancho Bernardo, in North San Diego County.

Two of Grumman’s existing programs will be moved to the new center: the MQ-4C Triton program currently in Bethpage, New York, and the NATO airborne ground-surveillance program in Melbourne, Florida. Wegerbauer said the move, which will bring 300 more jobs to San Diego, “reinforces the company's commitment to this viable market.”

Seeking to make it even more viable, the San Diego EDC and the San Diego Military Advisory Council have filed an application with the FAA to create a so-called drone test zone, which essentially means drones would be allowed to fly unencumbered in the area. These groups want to have the airspace in San Diego County and Southern California open for drones in order to make it an even friendlier environment for future drone business.

Craig Jones of the San Diego Coalition for Peace and Justice says there’s been a “drone awakening” recently from people of all political stripes.

The FAA reportedly plans to create six test zones in the U.S. as it integrates drones into the U.S. airspace. About 40 applications have been filed from across the country.

“The goal of the drone test zone designation is simply to further stimulate the industry in San Diego County,” says Sarah Lubeck, a spokeswoman for San Diego’s EDC. “While we understand and respect the concern over our civil liberties, at the end of the day, it’s all about creating jobs.”

But the rallying cries against drones are getting louder, even in San Diego, where Craig Jones of the San Diego Coalition for Peace and Justice says there’s been a “drone awakening” recently from people of all political stripes.

He suggests this comes from “repulsion of unending global war; the killing of hundreds of innocent people; the claim of national authority to conduct these remote-control killings without public, judicial, or congressional approval or review; and increasing unease about the deployment of drones at the border and by local police agencies.”

San Diegans have peacefully co-existed with fighter jets, war ships, and bomb-building defense contractors for decades, but this isn’t a conservative Navy burg any more. The demographics are changing, and some residents are uneasy about having drones in their backyard and overhead. Already 10 Predator drones patrol the U.S.-Mexico border.

Dave Patterson, a Vietnam veteran who coordinates a boisterous demonstration every Thursday at the General Atomics headquarters to protest the expanding use of drones for both military and domestic surveillance, says San Diegans are “opening their eyes to what drones represent and how much they potentially threaten our privacy and what we stand for as a country.”

Patterson, who once worked for a San Diego defense contractor, says he understands that drones have been a shot in the arm for San Diego’s economy.

“I don’t want to take away anyone’s job,” he says. “But I do want to see more legislative and judicial oversight of these drones. The defense contractors want to sell $13 billion in drones over the next 10 years, mostly for domestic law enforcement. To do that Congress has mandated that the FAA open the skies to 10,000 drones minimum. If they succeed, the Fourth and Fifth Amendments go up in a cloud of drones.”

Just how all the protests and pending legislation will impact San Diego’s booming drone business remains to be seen. But the locals are closely watching.

Meantime, San Diego has competition. More than two dozen states and regions from Florida to the Dakotas are engaged in efforts to lure drone manufacturing and development, according to the National University report.

That’s just about the same number of locations that are considering legislation to limit or ban the aircraft.

“It’s critical we keep the industry here in San Diego,” says Rosen. “It represents a huge workforce, a well-paid workforce, and it means dollars to local communities and small businesses, increased tax revenues, and more. A lot of people I’ve talked to about UAVs say, ‘They’re scary. We don’t want them here.’ There are a lot of NIMBYs [‘not in my backyard’] here. But when they learn more about UAVs, and they realize the financial impact they have on this community, they change their opinion. A lot of this resistance is just fear of the unknown.”